Cartel agreements are more likely to break down when
A. participating firms earn huge profits.
B. new firms enter the market.
C. there are few variations in market demand.
D. none of these.
Answer: B
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Buyers who were originally willing to buy 800 units of a good at $4 per unit are now willing to buy 1200 units at $4 per unit. That change would be described as: a. an increase in demand
b. a decrease in demand. c. an increase in quantity demanded. d. a decrease in quantity demanded.
If the Federal Reserve wanted to increase the quantity of money, it would
A) tell the banks to lower interest rates. B) purchase government securities in the open market. C) convince the federal government to run a budget deficit. D) sell government securities in the open market.
Heuristics:
A. are rules of thumb that generate decisions that generally maximize net benefits. B. take a long time to develop and are therefore avoided by rational decision makers. C. are shortcuts that save time and energy in decision making. D. always waste mental resources by leading people to suboptimal outcomes.
Requiring a home buyer to have a large down payment reduces the risk to a mortgage lender because:
A. it means there is more information available on the buyer. B. the buyer is less likely to sell the house. C. it means the buyer likely underpaid when she bought the house. D. it means that if the price of the house falls, the owner suffers the loss.